· Does the applicant have the capacity to repay the loan? Steady earnings, occupation, employment history, opportunities for the future, age, education and training for the position currently held may be considered. For the self-employed, profit-and-loss statements, balance sheets, income statements and tax returns for the two most recent fiscal years are often requested.

· Does the applicant show willingness to repay? A person's character, reflected in his or her credit history, shows patterns of repayment behavior in comparison to agreed-upon terms. The most favored applicants show an ability to handle debt and have paid on time successively. Applicants with slow-pay patterns, judgments, liens or bankruptcies may have to document their actions.

· What are the applicant's available assets? Existing capital resources as well as the applicant's cash reserves are considered by the underwriter. These show ability to pay downpayment and closing costs, and an ability to continue making payments in case of a job loss. Applicants able to make large downpayments are generally approved because their out-of-pocket investment means less chance of defaulting. Cash on hand based on a regular pattern of savings is preferred, as opposed to sudden surges in account balances. Grants or gifts of cash that don't need to be repaid are acceptable.

· What is the property's value? The real estate and its appraised value is what the underwriter considers as collateral, or assurance against loss, in case the borrower defaults and the home must be sold for the amount owed to recover the lender's investment.

· Does the loan conform to lending standards? The underwriter must determine if the loan falls within the range of risk the lender is willing to bear to make a loan. This is the compliance stage, and eligibility standards may be different from lender to lender and for different types of properties. If a loan does not comply, the underwriter may recommend the loan be made anyway if the applicant is willing to pay a higher interest rate, increase the downpayment or agree to different terms, thus mitigating the lender's risk.